Most likely, you want your retirement plan to do more than just pay for your comfortable life. You probably want to be sure your spouse continues to live well if you die first.
You may also want to leave money to your children or grandchildren. Life insurance is the only financial product in existence created for the purpose of providing you with money for a bequest or bequests as soon as you pay the first premium.
If you have enough money to continue to pay the premium, you need not be wealthy to leave your heirs a substantial sum.
Existing Life Insurance and Retirement Planning
As you approach retirement, you will probably want to take a careful look at your life insurance situation.
If you are maintaining a policy purchased earlier in life, you will want to review it.
- You will want to be sure that your beneficiary designation is current.
- If you have a policy issued before 2009, it is possible you can pay a lower premium for the same coverage. In 2009, the industry mortality tables were revised. They projected longer lives. This meant each insured had more time to pay premiums, So monthly premiums were reduced.
- If the surrender period of your existing policy has expired, you will pay no penalty for transferring to a new policy with lower monthly premiums. A new surrender period will begin, but surrender periods do not affect the amount paid your beneficiary or beneficiaries on your death. They affect only your ability to withdraw cash from the policy
Before you replace your policy with a new one think very carefully. If there is a chance you may need to withdraw cash from the policy or terminate it early, do not replace your old policy with a new one. The costs imposed on withdrawals during the surrender period will probably outweigh the premium savings of a new policy.
New Life Insurance and Retirement Planning
There is a myth that you need life insurance only when your children are at home or in school. Many well publicized financial advisors tell everyone in eye- or ear-shot that you should own life insurance only while you are young and raising a family.
In reality you and your spouse are never so old that you have no need for life insurance.
You can never be sure what emergencies your spouse might run into when you are no longer around.
Life insurance, if you can afford it after meeting your retirement income needs, will give you peace of mind:
- You will have a death benefit that passes to your spouse or heirs income-tax-free on your death. This allows you to have confidence that your spouse will be comfortable after you die. It also guarantees that the money you wish to pass to your heirs is there when the time comes.
- Long Term care riders allow you to use the death benefit for long term care if needed.
And as long as you do not need to withdraw cash from the policy, surrender fees have no effect. Surrender fees do not affect the policy’s death benefit.